A. No, actually, 401k plans or 403b plans are quite expensive.
401(k) or 403(b) plans have great tax benefits, but that's thanks to the IRS policies. Inside 401k or 403b plans, there are some very costly options - very high fees that most plan participants don't even notice.
Based on Investment Company Institute and Lipper studies, the average 401k fees are below:
- 2003: 0.83%
- 2008: 0.72%
- 2013: 0.58%
Yes, these fees are slowly declining, and if your portfolio size is small, you won't notice at all. But at 0.58% expense ratio, if at your retirement time, you accumulated $1 million 401k portfolio, your annual expense could be $5,800!
The good news is, a recent supreme court ruling has made it possible for employees to sue employers who fail to provide the lowest possible mutual funds in the 401k/403b plans.